Spread betting stocks – Change of long term trend for stock indexes

Spread betting stocks and stock indexes update following Friday’s close ahead of the long holiday weekend in the US for Independence Day.

We wrote on Thursday that the next couple of days were of potentially major significance for the stock markets and in particular the S&P 500, which earlier this week finally broke through long term support.

As we have written before, when we have a major trend change or breach of long term support or resistance we like to see the market close beyond the prior support/resistance level at least once and preferably twice to give confirmation. Ideally, we also like to see confirmation from Friday’s close in addition. Friday’s close is the most important close of the week as it represents the level at which traders are willing to hold their positions over the weekend.

On the September S&P 500 contract we saw a new low intra day of 1006.5, slightly lower than Friday’s close at 1014.3. It looks likely that we will get a test of support at 1000 next week, which is a major psychological round number and there is the possibility of a bounce higher from that level although both the long and short term trends are now down. If 1000 fails to hold the market then we look to the next support area around 980.

We have also written previously about the large head and shoulders pattern, which has been forming of late and the break below support this week gives a break of the neckline and points to a large continuation lower. Taking the distance from the top of the head to the neckline indicates a downside target in the 860 region, which is roughly the area of the July 2009 lows. Should the market fall to that level, which seems quite a long way off from here, then the next target would be the March 2009 lows around 650.

This potentially gives a major trade to the downside and would be an extremely profitable trade for those people that are spread betting stock indexes and are willing to go short as well as long. Users of financial spread betting should be equally comfortable spread betting from the short side as well as the long side if they want to increase their spread betting opportunities and profits. If anything, markets fall quicker than they rise, so trading profits can be clocked up quickly.

Good trading.

Phil Seaton

 

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